Postal Changes in Wake of Terrorism

As I sit in my office in New York City two days after the terrorist attack, it's difficult to contemplate exactly how to write an article on the postal environment. At my desk, which faces an open terrace on the upper east side of Manhattan, it's difficult to contemplate the death and destruction that took place just a few miles south of here. But we must move forward.

In one way or another, this disaster will have many an impact on the U.S. Postal Service. First, it's obvious that this attack on the United States will properly move, front and center, all congressional actions that deal with our government's reaction to the attack. Therefore, forget about postal reform legislation happening anytime soon. Second, this incident will profoundly affect any discussion of postal privatization, as has been suggested by former postmaster general William J. Henderson and others. Therefore, let's discuss two actions that have just been taken by the postal service: filing for higher postage rates and reorganization.

First the reorganization. It is clearly an attempt to centralize control over operations, reduce overhead and get the e-commerce activities back to supporting core activities. What specifically has reorganization done? The reorganization has:

· Eliminated 20 percent of the officer positions, and also eliminated the Midwest and Mid-Atlantic regions, absorbing them into adjoining regions.

· Eliminated three headquarters vice president positions: core business marketing, e-commerce and retail, consumer and small business.

· Eliminated the position of John Kelly, president of the expedited/package services division.

· Eliminated or left unfilled 800 headquarters positions.

· In place of these changes, the reorganization has:

· Moved the technology functions under the responsibility of chief financial officer Richard Strasser.

· Moved the responsibility for e-commerce activities under Nick Barraca, vice president of product development, who reports to Bizzotto.

· Reassigned the expedited/package services division back to Washington.

According to postmaster general Jack Potter, the postal service's e-commerce activities are not being eliminated. Rather, they will be looked at closely, and only those that support the core products and are profitable will be retained. It seems that since few, if any, of the e-commerce activities are profitable, most, if not all, will be eliminated. The elimination of a few e-commerce vice president positions and the movement of e-commerce activities to a lower reporting level seems to be a confirmation of future actions.

The second action taken by the postal service was the announcement of an upcoming filing for higher rates that will amount, in the aggregate, to about 9 percent.

The rationale for the rate request, formally expected late this month or early October, is the substantial deficit in fiscal year 2001, the general economic slowdown and weakening mail volume. One of the other situations facing the postal service is the upcoming labor negotiations and arbitration hearings with its labor unions. However, all this was being contemplated and announced before the terrorist attack.

Clearly, the situation is now quite different. Business as usual is no longer the case. The economic situation has obviously changed. The general economic environment, already weak, will likely get weaker.

Every business needs to do all it can to support a weakening economy. Surely the postal service, part of the business communications backbone, can do its part. The postal service and its unions need to "suck it up."

As a suggestion, they could jointly agree to keep the current labor contract in place for another year without any change in compensation. In return, the postal service could agree to negotiate staffing levels but with a free hand to change job assignments as workers leave the service. Clearly the last thing this country and the users of the postal service need now is a labor contract dispute, especially one settled by an arbitrator.

Is this the appropriate time for a postal rate increase filing?

With an already weakened economy, the postal service is too important a part of the vital infrastructure of the country to permit a rate increase filing to go forward. A postal rate increase, actual or anticipated, will further depress mail volume. Together with mailer groups and suppliers, the postal service and its employee groups need to come together and find a way to defer any postal rate increase filing for at least one year.